A Few Radical Money Moves

November 2013 - By

You may not be able to use some of the strategies suggested here, or you may not want to use them. Hey, we are all a bit different in what we want and what we can comfortably do. But in any case, here are a few of the more radical money moves that have worked for some people, including myself. You'll see how I paid off my first mortgage, paid cash for the next home, and bought used furniture as an investment. Though all the ideas here may not get you excited, if you want to really change your financial situation, one or two of them might be worth trying

Pay Cash for a House

I might as well start with the strategy least likely to be used by most people. Yes, many readers will say this is not possible, and that will be true for some. But there was a stronger argument for that position when home prices were rising faster than you could save the money. Since prices have fallen, and now that price increases are unlikely to be as fast as in the past, you just might be able to save to pay cash. In any case, if you get to $30,000 in your savings account and see prices starting to heat up, you can always change your strategy and get the usual mortgage loan, and you'll have a decent down payment.

Now, how do you really buy a home for cash? We did it 2002 when we moved to Montana, and our story demonstrates one important principle: you can buy small and work your way up over the years. We paid $17,500 cash for a perfectly livable two-bedroom home in a beautiful little mountain town. That isn't possible in too many areas today, and not everyone can move to where homes are cheaper, so we'll look at a more likely scenario.

I'll use Port Charlotte, Florida as an example, because we live near there at the moment, and we have even looked into buying a house there. In fact, we rejected a counter-offer of $40,000 on a ready-to-live-in 2-bedroom home because there are so many available for less than that (we had offered $38,000). Now, let's say a young couple there pays $850 monthly to rent a nice house, but they want to own one. Perhaps when their lease is up they can find a smaller house that rents for $600 per month (they exist, and there are no really bad parts to the town in my opinion). With that savings and a few tweaks to their budget they might start setting aside $600 per month. In six years they would have saved $43,200. Though prices will have risen, they might be able to pay $38,000 cash for a fixer-upper and do the work themselves to keep the total cost to less than $43,000.

Of course, you may need to be in a certain area for your job, so this strategy might not work for you. But in some areas your savings might get you into a mobile home on property within five or six years. On land they appreciate like other homes, by the way; one that I bought for $19,000 my wife and I later sold for $45,000. In any case, you would own something free and clear with no mortgage loan payment. Of course you have to pay taxes and insurance, utilities and maintenance, but let's say that you are spending $400 less per month than when you were renting. Maybe at this point, with a few tweaks to that budget, you can start to set aside $700 per month. Five years down the road, when you add those savings to the value of the place you bought, you might be ready for an upgrade. Never having a single house payment is something worth considering. It sure makes you feel better when times are tough.

Pay as You Go for College

Loans are not always necessary for college. They aren't always a bad idea, but they aren't always a good one either. You can work to save before you go, work as you go, and take time off if necessary to earn more money to pay for those classes. Even if it meant graduating a year or two later, wouldn't it be nice to have no debt hanging over you when you are done? This is easier if you attend a lower-cost college of course, but you can do that at first and then do the last year at a more prestigious university.

Save as Much as You Spend

Let's say you make $58,000, and take home $50,000 after taxes. Can you live on $25,000 and bank the other $25,000 for a future business, retirement or to someday climb Mount Everest? Perhaps you can if you bought your house for cash, and didn't use loans to get through college. The point here isn't to deny yourself the usual comforts of life, but if you happen to have any big goals, saving half of what you make will get you there sooner, and that might be more important to you than a nicer home or more nights eating out. This would be one of the more radical financial moves people could make, but it is probably possible for quite a few people if the intention and work is there.

Never Have Credit Card Debt

After 25 years of having credit cards, I still don't pay interest on them because I pay off the balance every month. I did use a cash advance once, and paid 4.9% interest (it was a special), but only because I loaned the money out at 9% interest. Here's something to think about: If you run balances on your cards you pay more for everything you buy with them, and if you spend a lifetime paying much more than a cash buyer for everything you buy, you get to buy less than he does. Money doesn't do a thing for you except through what you get for it. Wouldn't you prefer to get more for it throughout your life, instead of having the illusion of getting more by getting a few of those things right now? Wait and pay cash.

Get Rid of a Car

It is not always possible to live without a car if you are in a town without public transportation. But if you have two cars you can find a way to get rid of one. Even a car that has no loan on it can cost a few thousand dollars per year to operate. That's enough to fund an IRA or take a trip to Spain -- every year. Unless a car is crucial to your work or your identity and you have no other important goals, at least consider dumping one of them, and maybe even the only car you have. Money moves like these free up enough income to create a world of new opportunities that you might not have thought of.

Rent Rooms in Your Home

This one is definitely not for everyone, but when I did it I was single and it paid off the mortgage, leaving me living for free and with income. As a result, I almost never worked a full-time job, and I traveled often. You can learn more about this idea on the following website (which consists of a free book that I used to sell):

Renting Rooms in Your House

Take a Break From Buying

What would happen if you just stopped buying things? You don't really know, but you can find out. Of course you need food and such, but try a few weeks or months of buying nothing unnecessary. Make your socks last longer even. It might drive you crazy, but it also might lead you to find activities you like better than buying and caring for things, and the money saved can all be spent later anyhow. One of the best things about doing this exercise for a while is that it helps you identify what you really value and what you wouldn't really miss, which lets you adjust your spending habits to get more of what matters.

Buy Furniture as Insurance

This last one of these money moves is a minor one, but interesting because it points out the different perspective that are possible. We tend to buy furniture just because we like it, and there is nothing wrong with that. But what if you found things that you not only liked, but which also safeguarded your future as well? How? By buying furniture which can be sold for more than you paid for it.

I first stumbled upon this idea years ago when reading the book The Millionaire Next Door. The authors mentioned that many wealthy people buy antique furniture not only for personal use, but also as an investment. If necessary they can sell off their furnishings for more than what they paid for them. It's like having money in the bank but being able to use it still (but try to avoid nasty spills and other damage).

Now, I don't know enough about antiques to do this, nor do I have any interest in things just because they are old. But when we lived in Colorado my wife and I did buy higher-quality wooden furniture at used furniture stores, thrift stores, and rummage sales, and when we moved to Florida we sold many pieces for more than what we paid. As I said, this is not one of the more important strategies, but it's nice to know that, if necessary, you can cash in the furniture in hard times.

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